4 Options for Exiting Your BusinessDec 09, 2022
Have you ever envisioned the future of your company once you’re no longer running it?
Maybe you think of selling it, or passing it on to your heirs… Or maybe you think of expanding, franchising, and growing even more. All of these –and a lot more– are what we call exit options, and they’re all possible with the right planning.
As a business attorney and the founder of A Better Exit, I specialize in helping business owners like you create the future they want for their business, whether that means legally exiting or simply taking themselves out of the day to day of it.
In this article, I’ll share the four main options you have for exiting your business. These aren’t the only options, but rather the four that business owners choose most often. (At the end, I’ll give you a little sneak peek at a few more!)
The first option you have for exiting your business is to actually license or sell your content. There are a lot of online course creators out there. If you’re one of them, here’s why this option might be your best one.
You’ve put a lot of time and effort into creating the business model, products, services, programs, and downloadables that you currently sell. Imagine if all those elements could now be sold by someone else too.
When you license your valuable intellectual property, you get to benefit from what you’ve created. Doing this can look 2 different ways:
- You can keep running your business and simply collect royalties. This means you may still be selling your products, but you're giving other people the right to sell them and getting kickback from them.
- You can sell your content altogether with either a one time payment OR future royalties from the revenue that those products give their new owner.
Let’s say you’re an online coach or course creator. Another coach who has taken your programs before is starting their own business and doesn’t have their own client roster yet. Instead of reinventing the wheel, they could want to teach your program because they believe in its results and want to be able to offer it to people too.
That’s when you license your content to them, so they essentially take over your business by taking your intellectual property and making it part of their own.
2. Selling To Business Partner Or Employee
Another way to exit your business (and a very common one) is to sell your company to a business partner or a key employee. This may be just one person or a group of people (for instance, opting out as a partner and selling to all other partners) and it’s a type of internal sale.
An internal sale means you don’t need to go out and market your business. Instead, the whole process happens in-house as you pass on your company to:
- Your operations manager
- Your second in command
- Your general manager
- An employee who has been in your company for a while and understands the know-how within it
- An employee who is truly invested in the company’s mission and is critical to its operations
- Your other business partners – this happens when some of you want to sell the company but others don’t. It’s a way to remove yourself from the equation and get the benefits of selling.
An internal sale is typically a smooth transition, especially for you and your clients. I’ve seen internal sales where the clients don’t even notice that the owner has left the business!
In this case, your clients have been working with your key employees or co-owners for some time, so the process is smooth because, client-facing, everything remains the same. That’s possible when you plan your exit smartly.
3. Selling To A Third Party
The third most common way to exit your business is selling to a third party. This is actually what most people think about when you say you’re selling your business.
To start with, you’ll be looking for someone who understands your business, or at least the value of your business and the industry it’s in. That’s why often, the main interested buyers when you put your company up for sale are:
- Industry competitors. You might be running a small practice that’s successful and appealing to a bigger national company that owns offices across the country.
- People who want to get into your industry and know that the smart way to do that is to purchase a company that has been running successfully.
- Business owners who run companies that would increase their value with yours. For instance, if you’re selling mindset programs, a fitness and wellness company might want to add your mindset programs to their offer so they can serve their own clients better and grow as a company.
Whether they’re interested in your business because they know that they can add more value to it and optimize their revenue, or because they want to break into an industry they’re passionate about, selling to a third party involves planning and strategy to make sure that when you do sell, you do it for top dollar.
4. Leaving It To Your Heirs
The fourth most typical way to exit a business is to leave it to your family or heirs.
There are a lot of business owners who have built incredible legacies. I see this all the time with family-owned restaurants that have been run by families for generations, or with service-based businesses where the younger family members start working with their parents. Then, when the time comes, the older family members pass on the business and they keep their legacy alive.
Even though this might seem like an easy exit option, it can actually take as much or more work than selling to a third party in all of the previous situations!
Other Exit Options
As promised, here’s a little sneak peek into a few other options for exiting your business.
- Closing down without selling. Some people who feel very strongly about their legacy and how their business is operated if they’re not running it, prefer to close down their business instead of selling it. This is an option I don’t often recommend, because there’s a lot of value you can get from choosing a different exit. But, if a client prefers it, there’s still a lot of work we need to do to make this happen neatly.
- Bankruptcy. Although this isn’t really a planned or ideal exit, bankruptcy is a reality that some business owners have to face.
- Merger. In some cases, instead of fully exiting the company right away, you become part of a bigger one that acquires your company through a merger. In those cases, you can stay on board while you pass on the know-how of your company, and then finally exit.
All these options are also valid, and I teach about all of them in A Better Exit. The top four continue to be licensing or selling your intellectual property, selling your business to your business partners or your key employees, selling to a third party buyer, or leaving your business to your family or heirs.
Avoiding Liability When Selling
The one thing that all these options have in common is that you have to do some preparation in advance and you have to make sure you have really solid contracts when it's time to exit your business.
That is because as an exiting business owner, you need to make sure that you don’t have any continuing liability (AKA – nobody can come knocking on your door in 5 years, expecting you to deal with company issues).
If you’re licensing your intellectual property, you may have some continued obligations to only license it to them and not let anybody else use it.
If you have copyright trademarks, you will have to maintain the registration.
But in most cases, when working together, business owners and I make sure we insulate them from liability so that they can move on to their next endeavors. We make sure that their assets and their family are protected from post-closing or post-sale liability.
The reason I created A Better Exit was to give business owners clarity on their options and help them put everything they need in place to have a smooth, profitable sale that creates the perfect ending to their business’ story.
So whether your dream is to leave your life's work to your children or to sell and cash out from millions and millions of dollars, it all starts with an exit strategy. If you’re ready to start thinking about the future, book a free call with me and let’s see how to bring your vision to life!